Does My Business Need to Run Due Diligence on Third-Party Suppliers Under UK GDPR?

Does your business share personal data with third-party suppliers? If your business outsources IT support, payroll, or marketing services, you will likely share personal data with these third parties. Under UK GDPR rules, your business, as the data controller, must ensure that any third parties processing personal data for you do so securely. To achieve this, you should conduct thorough due diligence on these suppliers to ensure they safeguard the personal data your business shares with them. This article explains why due diligence is essential under the UK GDPR and how it protects your business from risk.

Are You Using Third Parties Who Process Personal Data?

As a first critical step, you should evaluate whether your business shares personal data with third parties, which triggers various legal obligations under the UK GDPR. Many businesses rely on third-party suppliers, such as payroll providers or IT support companies, to process personal data. 

For instance, your business might share employee information with a payroll service or grant IT support access to your systems and staff details for troubleshooting. In these cases, your business acts as the data controller, and the third-party supplier becomes the data processor, managing your data on your behalf. The UK GDPR holds your business responsible for ensuring these processors comply with data protection laws. Conducting due diligence is critical to protecting personal data and minimising risks to your business.

What are Your Responsibilities as a Controller?

As the data controller, your business is responsible for selecting competent processors and ensuring ongoing compliance with the UK GDPR. The rules require your company to assess whether a processor provides sufficient guarantees of data protection before you share any personal data. Your business must evaluate several factors to ensure the processor’s compliance with data protection standards. 

For example, you need to verify whether the processor has implemented the necessary security measures, can report data breaches to you within required timeframes, and can assist your business in meeting data protection obligations.

Due diligence for your business involves evaluating whether a third-party processor complies with the UK GDPR’s rules. Your company must confirm that the processor has strong security measures, such as encryption and access controls, to protect personal data. This thorough due diligence process helps ensure that your suppliers meet legal obligations and handle personal data responsibly.

What Questions Should Your Business Ask Suppliers?

When evaluating a supplier, your business should ask several key questions to assess their compliance with the UK GDPR.

For example:

• What security measures do you have in place, and do you have any certifications, such as ISO 27001? Your business needs to ensure it has measures and controls to protect data.
• How do you manage data breaches? You should confirm they have clear procedures for detecting and reporting violations to your business.
• Do you use sub-processors? If yes, how do you ensure those sub-processors comply with data protection laws? 
• Will you transfer personal data outside of the UK, and what safeguards do you have in place where necessary?
• What are your data retention and disposal policies? Your business should confirm that it securely disposes of data when it is no longer needed for its services.

What Does the Data Protection Regulator Expect From Your Business’s Due Diligence?

The UK Information Commissioner’s Office (ICO) expects a business to integrate due diligence into procurement processes and conduct ongoing checks throughout the relationship with processors. The ICO expects your business to thoroughly assess your suppliers’ data protection practices, including evaluating their technical expertise, organisational practices, and security measures. 

The ICO also requires your business to monitor the processor’s compliance regularly through audits and reviews to ensure they continue to meet data protection standards. The depth of checks your business conducts should correspond to the level of risk involved.

Your business must conduct more detailed checks for higher-risk processing activities, while lower-risk activities may need fewer checks. By meeting these expectations, your business can demonstrate its commitment to data protection, reduces the risk of breaches, and ensures ongoing compliance with the UK GDPR.

However, due diligence is more than just a simple tick-box exercise. It is a critical tool that helps your business manage and reduce risks. By conducting thorough due diligence, your company helps reduce the likelihood of data breaches and associated legal and reputational damage. Proper due diligence also helps mitigate penalties in the event of a data breach.

How Can a Lawyer Help Your Business with Due Diligence?

A data protection lawyer can provide essential guidance if your business needs support to conduct appropriate levels of due diligence on third-party suppliers. A lawyer can evaluate your business’s commercial relationships and help identify where due diligence is necessary.

They can create tailored checklists and audit frameworks for your business to assess suppliers comprehensively. They can also draft and review data processing agreements that comply with the UK GDPR and protect your business’s interests. Additionally, a lawyer can assist your company in guiding you on setting up processes for ongoing monitoring to ensure your suppliers remain compliant throughout the relationship.

It is crucial for your business to get this process right, so you should seek legal advice if you need assistance in carrying out due diligence and meeting your UK GDPR obligations.

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Key Takeaways

As a data controller, your business must ensure that third-party suppliers handle personal data in compliance with the UK GDPR. This requires conducting due diligence before engaging a processor, evaluating their data protection measures, and maintaining continuous oversight through audits. The ICO expects your business to take these steps to minimise the risk of data breaches and ensure compliance. By performing due diligence, your business can safeguard itself from regulatory penalties, protect client trust, and reduce long-term risks.

If you need help understanding which UK GDPR compliance obligations apply to your business, LegalVision’s experienced data privacy lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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